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October 28, 2005

New ranking of states' business climates for small business gives poor grades to New York

New York has one of the nation’s least hospitable environments for small businesses and entrepreneurship, a new national ranking of all 50 states shows.

New York is ranked only 44th on the Small Business Survival Index 2005, which was released earlier this month by the Small Business and Entrepreneurship Council (SBEC). The 2005 index is the SBE Council’s 10th annual ranking of state’s climates for small businesses.

The index seeks “to gauge, state by state, whether public policies help or hurt the entrepreneurial sector of our economy, which of course is so important for economic growth, innovation and job creation,” according to Raymond J. Keating, chief economist for the SBE Council.

The 2005 Index has been revised and expanded, notably by adding four measures of health-care regulation, Keating said. "Health care costs are a heavy burden on small businesses, and those costs most assuredly are affected by government regulations and mandates.”

The Index analyzes 26 major government-imposed or government-related costs affecting small businesses and entrepreneurs, including an assortment of taxes and measures that reflect various regulatory costs. These government-imposed or government-related costs are added together to compute an overall rating. The entire report is available at www.sbecouncil.org.

The index makes possible comparisons of states in terms of tax burdens and regulatory costs, Keating said.

“Economic common sense, backed up by a large body of economic literature, makes clear that these policies matter a great deal to entrepreneurs, businesses, employees and overall economic health,” he said.

The 2005 Small Business Survival Index shows that New York has the nation’s:

The study also adds to the evidence showing that states with competitive business climates tend to have more robust population growth.

“From 2000 to 2004, the 25 best ranked states on the Index experienced population growth that was 56 percent faster than the worst 25 states plus the District of Columbia,” Keating said.

“Equally interesting is net domestic or internal migration, that is, movement of people between the states. From 2000 to 2004, the top 25 states on the Small Business Survival Index netted a 1.64 million increase in population at the expense of the bottom 25 states plus the District. For good measure, employment growth was much faster among the top 25 states versus the bottom 25 plus D.C.”

Small Business Survival Index 2005: State Rankings

1 South Dakota 26 North Dakota
2 Nevada 27 Wisconsin
3 Wyoming 28 Kentucky
4 Washington 29 Oklahoma
5 Michigan 30 Utah
6 Florida 31 Kansas
7 Mississippi 32 Nebraska
8 Alabama 33 New Mexico
9 Indiana 34 West Virginia
10 Colorado 35 Louisiana
11 Texas 36 Connecticut
12 South Carolina 37 Oregon
13 Virginia 38 Montana
14 Pennsylvania 39 North Carolina
15 Tennessee 40 Ohio
16 Arkansas 41 Iowa
17 Arizona 42 Massachusetts
18 Missouri 43 Vermont
19 Idaho 44 New York
20 New Hampshire 45 New Jersey
21 Alaska 46 Hawaii
22 Georgia 47 Minnesota
23 Illinois 48 Rhode Island
24 Delaware 49 Maine
25 Maryland 50 California
51 Dist. of Columbia